Lawmaker eyes tobacco money for tax cuts

TALLAHASSEE -- Senate President John McKay said Wednesday that new tobacco settlement money not previously available can be used to provide $49 million in tax cuts.

The Senate would still be offering Floridians far less in tax breaks than the House, which is seeking seven times that with a $355 million package of cuts.

But the new money could allow at least a shortened version of a popular sales tax holiday to return, giving shoppers a six cents-on-the-dollar break on clothing around back-to-school time, and breaking a stalemate with the House.

McKay and House Speaker Tom Feeney, both Republicans, have been at odds over how much the state can afford in tax cuts this year with a tighter economy and growth in health care costs making things tighter.

McKay had said earlier this year that the Senate would spend the $355 million instead on education and health care programs to avoid cuts in those areas. The budget the Senate passed included no tax cuts.

But with the two sides trying to work out their differences on the state spending plan, Feeney suggested in a letter to McKay earlier this week that $49 million in additional money from Florida's 1997 settlement with cigarette makers would allow the Senate to give some on its no-tax-cut pledge.

''That's probably what you do with the $49 million,'' McKay agreed late Wednesday.

Asked if that would be his starting offer to Feeney to break the impasse over tax cuts, McKay replied, ''That may be the only offer.''

The suggestion angered House Democratic Leader Lois Frankel, who also has opposed tax cuts.

''The state sued big tobacco to reclaim all the dollars we spent to take care of the Floridians whose health was damaged by big tobacco,'' said Frankel, D-West Palm Beach. ''To take that money and use it for tax cuts ... you want to talk about breaching promises. I think the public expects that money to be used on health.''

Florida sued tobacco companies to recoup the cost of treating sick smokers who were covered by Medicaid.

Most of the money has gone into programs for children, the elderly and medical research.

The amount of money Florida gets each year from the settlement can vary based on the cigarette companies' earnings and a clause that ups Florida's share when the industry reaches other settlements.

McKay said an adjustment on how much the state expected to receive this year was responsible for the new money being available.

While McKay has kept his thoughts on where he might be willing to negotiate close to his vest, Feeney has made an open offer.

The speaker sent a letter to McKay suggesting where he could come up with the full $350 million, and offering to spend the same amount of money as the Senate on education and health care.

But McKay rejected Feeney's other ideas, particularly a suggestion to cut the state work force by more than 1,500 people.

''That would really jeopardize delivery of services to the citizens, so we're not going to do that,'' McKay said.

McKay's top lieutenant on the budget, Sen. Jim Horne, elaborated on how the Senate might meet the House on tax breaks, saying that the popular sales tax holiday would probably return, although in a shortened form.

Horne, R-Orange Park, said he thought the Legislature will eventually approve the break, which shoppers have gotten used to in the last two years.

''That seems to be religious,'' Horne said. ''People can relate to that.''

A House proposal called for a nine-day sales tax holiday, but Horne said he thought after negotiations that would be scaled back to three or four days.

The House has also proposed a cut in the intangibles tax on stocks and bonds -- something Republicans have said hurts the elderly, some of whom have their life savings in investments. They also say it punishes those who have saved their money, in effect forcing them to pay taxes again on money they were taxed on when they earned it.

Horne said an intangibles tax cut might not be out of the question.

The House and Senate have each passed separate spending plans for the state for the coming fiscal year. In the next couple weeks, they have to work out the difference and send a budget to Gov. Jeb Bush to sign. It's the only thing lawmakers are required to do during a session -- although they can extend their session to get it done.